Higgins Urges Prevention of Losses for Western New York Housing Authorities

November 1, 2006

Higgins’ Proposal Would Save Western New York $8.7 Million

Washington, DC—Today, Congressman Higgins led 107 Members of Congress in asking the Chairman and Ranking Member of the House Appropriations Subcommittee on Transportation, Treasury, Housing and Urban Development, the Judiciary and District of Columbia (TTHUD) to include language in H.R. 5576, the 2007 TTHUD Appropriations bill, which would save Housing Authorities from losing over $177 million nation-wide, easing the burden on agencies that administer low-income housing.

“One in five American children live in poverty,” said Higgins “and Congress should work to improve their chances for a better life by ensuring that our Housing Authorities have the resources they need to provide stable, affordable housing.”

Higgins’ letter specifically asks the Chairman and Ranking Member to include Sections 324 and 325 of the Senate Appropriation Committee-passed version of H.R. 5576 in the final draft of the bill. HUD recently created a new funding formula for Housing Authorities, under which some authorities will lose funding and some will gain. New York State could lose $83 million in funding, with Housing Authorities in Buffalo, Niagara Falls, Jamestown, Lackawanna, and Kenmore losing $8.7 million. Section 324 and 325 can help reduce those losses simply by extending certain deadlines and by allowing flexibility.

Specifically, by coming into compliance with HUD’s new regulations in a timely manner, Housing Authorities can stop their losses. Because HUD has taken longer than expected to issue regulations, Higgins’ letter supports extending the deadline by which authorities need to be in compliance.

Additionally, Higgins’ letter also supports upholding current rules regarding the use of Capital Funds, which allows some of this money to go to support essential general operations, in order to ensure that Housing Authorities continue to have the flexibility they need to operate effectively.

We are writing to ask that you include Sections 324 and 325 of the Senate Appropriations Committee-passed version of H.R. 5576, the FY 2007 Transportation, Treasury, Housing and Urban Development, the Judiciary and District of Columbia (TTHUD) Appropriations Act in the final version of this bill during conference negotiations. These two provisions will ensure a more fair and reasonable implementation of the Department of Housing and Urban Development’s (HUD) public housing asset management initiative as well as the ongoing success of the public housing program.

The Quality Housing and Work Responsibility Act (QHWRA), passed by Congress in 1998, included a requirement for negotiated rulemaking to develop a new public housing operating fund formula. Rulemaking concluded in 2004, after a three-year, $4 million Operating Cost Study was conducted. Because the formula developed in the Cost Study has a 43 percent error rate, which would be disastrous for any agency, HUD and the negotiators agreed to include a “stop-loss” in the Final Rule wherein agencies that stand to lose funding under the new formula may, by becoming compliant with HUD’s new asset management program on an accelerated schedule, stop their loss of funding at a certain level.

Section 325 of the Senate bill provides a one-year delay in the October 1, 2006 published deadline for stop-loss compliance submittals by housing agencies. It has taken HUD more than a year to publish the necessary program information for agencies to implement the new asset management practices. This has deprived agencies of the 12 to 18 months preparation time anticipated by the negotiators to make this costly change to their operations. While HUD officials have recently announced a delay to April 2007 instead of October 2006, an April date is still wholly insufficient, in fact, a critical piece of information for stop-loss preparation was published by HUD only in September of this year. Adoption of the Senate language will ensure that housing authorities have a reasonable amount of time to transition to asset management and to qualify for stop-loss.

Under HUD’s new asset management program, the federal subsidy for public housing will now be designated to specific properties and not to the central office. Central offices will be required to fund critical general operations including executive, legal, and human resource activities, policy-making, enforcement, compliance, asset management, and management oversight among other integral functions with management fees collected from the properties that they serve. Unfortunately, because the federal subsidies for properties across the nation will be funded at only 78 percent of the total amount they need to operate, many central office cost centers will not be able to collect enough in management fees to operate effectively. In the past, housing authorities could make up for part of the gap in general operating funds by using Capital Funds; however, HUD issued departmental guidance stating that it will no longer allow this. Local housing agencies across the country, in particular smaller agencies with limited resources, need the statutory flexibility to continue to use Capital Fund resources to cover essential general operating costs when necessary. Without this flexibility, their mission of providing decent and affordable housing to those who need it most will be in jeopardy.

Section 324 of the Senate bill contains a provision upholding current statute that permits housing agencies to use Capital Funds to support critical general operations. Section 324 is necessary as HUD has issued guidance, which is in effect regulation, which overrides current statute (United States Housing Act of 1937, 42 U.S.C. 1437g(d)), disallows the use of Capital Funds for general operations, and would thwart the ability of housing agencies to achieve their mission.

Public housing serves over 2 million low-income people including families with children, seniors, and people with disabilities in 14,000 communities nationwide. Without the protection Sections 324 and 325 provide, our communities could lose up to $177 million over the five-year phase-in. We hope you will support our public housing authorities and will adopt Sections 324 and 325 from the Senate language. Your attention to our concerns is appreciated.